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> Accredited investor rules was an example of not having a even playing field. 1. Having an income that qualifies you as an accredited investor doesn't mean th

> Accredited investor rules was an example of not having a even playing field. 1. Having an income that qualifies you as an accredited investor doesn't mean that you will have access to higher quality investments. 2. Even if you don't qualify as an accredited investor, you probably still have access to the same set of investments that a capital-poor accredited investor has access to. As an accredited investor, I've never had access to an investment opportunity which I couldn't have also accessed without being an accredited investor. No one checks, and the "opportunities" are mostly not great anyways unless you have a lot of capital and connections. The operative things that unlock unfair investment opportunities are 1. one's professional network (or family), and 2. access to large amounts of capital. You can counter this assertion by providing a list of investments which are open to all accredited investors, do not require significant amounts of capital, and which have higher expected return with lower risk than investments that are available to non-accredited investors. The common misconception that becoming an accredited investor suddenly gives you access to high quality investments with super high returns for low risk is one of the best justifications I've ever seen for keeping the rule in place... which is particularly funny because I'm not even an avid fan of the accredited investor rule.

datadata 5y ago
You are basically saying that accredited investor rules are not successful in excluding people from making certain types of more desirable investments, because there are other barriers that are in place anyway. I think this is true, but beside the point. If you want to have an even playing field for investing, every barrier is an obstacle.
- thwayunion 5y ago
  > I think this is true, but beside the point. I think you missed my point. To reiterate: the fact that people believe that it's not true is, ironically, a convincing justification for the accredited investor rule. I'm pointing out the irony, not defending the rule per se. > If you want to have an even playing field for investing, every barrier is an obstacle. This clearly isn't true. First, it's sort of prime facie false. Investments usually happen in markets. Markets are human inventions comprised of collections of barriers on behavior and enforcement mechanisms for those barriers. (Investments that happen outside of markets do exist, but they usually involve violence and/or coercion under threat of violence, so probably not what you mean when you say investment.) Second, there are many ready examples. E.g., SEC filings and public exchanges are clear barriers to entry in fund raising, but also clearly level the playing field. The alternative is that the only way to know about a company's finances is to know the right people.
  - datadata 5y ago
    I agree that markets are not natural and don't happen magically without human oversight and rules. But generally we want those systems to increase participation in the market. The criteria of net worth as a obstacle to market participation seems pretty indefensible here. It is hard for someone to commit to changing their net worth in the same way that a company can decide to become public, or that a wealthy person can sign a contract saying they are aware of investment risk. I would support some rule like "you must have either this net worth or prove that you are knowledgeable about investment in some way". The criteria has to be something that people are able to overcome.
    - abduhl 5y ago
      >> I would support some rule like “you must have either this net worth or prove that you are knowledgeable about investment in some way” This is the accredited investor rule. You qualify as an accredited investor through income, net worth, or having a current Series 7/65/82 license.
      - datadata 5y ago
        Thank you for pointing this out, I had no idea!
    - thwayunion 5y ago
      At the risk of sounding like an incredibly broken record: >> I think you missed my point. To reiterate: the fact that people believe that it's not true is, ironically, a convincing justification for the accredited investor rule. I'm pointing out the irony, not defending the rule per se. and >>> I'm not even an avid fan of the accredited investor rule. So, as I've stated in every single post in this thread, I'm not defending the accredited investor rule. Cool? The justification for the accredited investor rule is "people are idiots". Again, not even that rich = less of an idiot. The premise of the rule is that rich people can afford to be bamboozled by scams and shitty investments... er, I mean, take on "higher risk investment opportunities". I find that justification uncompelling on face. But then people come along and complain "I can't use prosper.com to make unsecured personal loans to randos for an expected return of 5.7% per annum on loans with 15%-20% APY during a time when every other asset class out-performed and with the front end of that window overlapping with a time when unfathomably higher quality debt products were offering similar returns on 3 year timeframes". And just listening to them makes me second-guess myself. My point? It is ironic and humorous that the most compelling justification for the accredited investor rule is listening to people talk about how they would invest if the accredited investor rule didn't exist. For the record, since people keep completely losing the plot: I think something like an educational requirement makes a lot more sense.
tastyfreeze 5y ago
Prosper.com and similar lending platforms do not require a lot of capital but users are required to be accredited investors.
- thwayunion 5y ago
  On the customer side, this website offers high APY personal loans (my credit card is literally a better deal). On the investor side, the advertised rate of return is 5.7% between 2019 and 2022. 1. An effective return of 5.7% on unsecured loans with 15%-20% APY is... not a good deal. This signals either exceptionally high origination fees or extraordinary risk. Except it looks like you are investing in individual loans? So you don't even get this amortized 5.7%, but actually something that looks closer to "either 15% return or you lose your principal". 2. The rate of return is lower than every other broad asset class over that time period except for investment grade bonds, which weren't that far behind in 2019 and were probably a better deal given the enormous difference in risk profiles. Certainly high yield corporate debt was a way better deal on a risk-adjusted basis than given randos high-yield unsecured personal loans. 3. Most importantly, to my original point, you can get much higher quality exposure to high yield consumer debt via any brokerage account. This is sort of exactly what I mean. Most of the "opportunities" widely available to accredited investors are really shit deals.
- TacticalCoder 5y ago
  > Prosper.com and similar lending platforms do not require a lot of capital but users are required to be accredited investors. Last I checked to be an accredited investor, in the EU at least, you had to have 1 million EUR available for investments. So an organism (like a bank), where you have that amount, will certify that you have it and then you can get labelled "accredited investor". As a sidenote I don't see it as proving you're savvy or anything: it's more like a club where they don't want "plebs" to pollute their members. The whole concept stinks.
  - thwayunion 5y ago
    In the US $200K income suffices. Also, if prosper.com is the "club", then it's a pretty shit club. VISA provides exposure to the high yield consumer credit market and had returns that were modestly higher than prosper over the same time frame. By which I mean ~100% appreciation over 3 years vs. 5.7% per annum. And the risk profile of the equity play might even be lower; we don't know, since the distribution of defaults is not published by prosper.
fragmede 5y ago
These days there are a number of platforms like Globevestor that show the kind of deals available to accredited investors. They don't get you access to the same deals that you get by working Sequoia, but that's still better than what non-accredited investors get access to. (WeFunder, specifically, tries to skirt the accredited investor regulation and offers tiny (they advertise "as little as $100") investments to non-accredited investors. It's not clear to me how they're doing that legally other than handwaving "crowdfunding platform" around.) Accredited investor status itself doesn't give you access to higher quality investments, but it keeps the poors out from being able to angel invest in their professional network. If I'm not an accredited investor and I have $10k that I've saved up and want to plow into my kid's friend's uncle's big thing that they're working on? It might turn out that the uncle's a total scam artist or the next Elon Musk, but it's my $10k. I'm allowed to go to vegas and put it all on black if I wanted to, so why aren't I allowed to invest same as an accredited investor?

datadata 5y ago

You are basically saying that accredited investor rules are not successful in excluding people from making certain types of more desirable investments, because there are other barriers that are in place anyway. I think this is true, but beside the point. If you want to have an even playing field for investing, every barrier is an obstacle.

thwayunion 5y ago
> I think this is true, but beside the point. I think you missed my point. To reiterate: the fact that people believe that it's not true is, ironically, a convincing justification for the accredited investor rule. I'm pointing out the irony, not defending the rule per se. > If you want to have an even playing field for investing, every barrier is an obstacle. This clearly isn't true. First, it's sort of prime facie false. Investments usually happen in markets. Markets are human inventions comprised of collections of barriers on behavior and enforcement mechanisms for those barriers. (Investments that happen outside of markets do exist, but they usually involve violence and/or coercion under threat of violence, so probably not what you mean when you say investment.) Second, there are many ready examples. E.g., SEC filings and public exchanges are clear barriers to entry in fund raising, but also clearly level the playing field. The alternative is that the only way to know about a company's finances is to know the right people.
- datadata 5y ago
  I agree that markets are not natural and don't happen magically without human oversight and rules. But generally we want those systems to increase participation in the market. The criteria of net worth as a obstacle to market participation seems pretty indefensible here. It is hard for someone to commit to changing their net worth in the same way that a company can decide to become public, or that a wealthy person can sign a contract saying they are aware of investment risk. I would support some rule like "you must have either this net worth or prove that you are knowledgeable about investment in some way". The criteria has to be something that people are able to overcome.
  - abduhl 5y ago
    >> I would support some rule like “you must have either this net worth or prove that you are knowledgeable about investment in some way” This is the accredited investor rule. You qualify as an accredited investor through income, net worth, or having a current Series 7/65/82 license.
    - datadata 5y ago
      Thank you for pointing this out, I had no idea!
  - thwayunion 5y ago
    At the risk of sounding like an incredibly broken record: >> I think you missed my point. To reiterate: the fact that people believe that it's not true is, ironically, a convincing justification for the accredited investor rule. I'm pointing out the irony, not defending the rule per se. and >>> I'm not even an avid fan of the accredited investor rule. So, as I've stated in every single post in this thread, I'm not defending the accredited investor rule. Cool? The justification for the accredited investor rule is "people are idiots". Again, not even that rich = less of an idiot. The premise of the rule is that rich people can afford to be bamboozled by scams and shitty investments... er, I mean, take on "higher risk investment opportunities". I find that justification uncompelling on face. But then people come along and complain "I can't use prosper.com to make unsecured personal loans to randos for an expected return of 5.7% per annum on loans with 15%-20% APY during a time when every other asset class out-performed and with the front end of that window overlapping with a time when unfathomably higher quality debt products were offering similar returns on 3 year timeframes". And just listening to them makes me second-guess myself. My point? It is ironic and humorous that the most compelling justification for the accredited investor rule is listening to people talk about how they would invest if the accredited investor rule didn't exist. For the record, since people keep completely losing the plot: I think something like an educational requirement makes a lot more sense.

tastyfreeze 5y ago

Prosper.com and similar lending platforms do not require a lot of capital but users are required to be accredited investors.

thwayunion 5y ago
On the customer side, this website offers high APY personal loans (my credit card is literally a better deal). On the investor side, the advertised rate of return is 5.7% between 2019 and 2022. 1. An effective return of 5.7% on unsecured loans with 15%-20% APY is... not a good deal. This signals either exceptionally high origination fees or extraordinary risk. Except it looks like you are investing in individual loans? So you don't even get this amortized 5.7%, but actually something that looks closer to "either 15% return or you lose your principal". 2. The rate of return is lower than every other broad asset class over that time period except for investment grade bonds, which weren't that far behind in 2019 and were probably a better deal given the enormous difference in risk profiles. Certainly high yield corporate debt was a way better deal on a risk-adjusted basis than given randos high-yield unsecured personal loans. 3. Most importantly, to my original point, you can get much higher quality exposure to high yield consumer debt via any brokerage account. This is sort of exactly what I mean. Most of the "opportunities" widely available to accredited investors are really shit deals.
TacticalCoder 5y ago
> Prosper.com and similar lending platforms do not require a lot of capital but users are required to be accredited investors. Last I checked to be an accredited investor, in the EU at least, you had to have 1 million EUR available for investments. So an organism (like a bank), where you have that amount, will certify that you have it and then you can get labelled "accredited investor". As a sidenote I don't see it as proving you're savvy or anything: it's more like a club where they don't want "plebs" to pollute their members. The whole concept stinks.
- thwayunion 5y ago
  In the US $200K income suffices. Also, if prosper.com is the "club", then it's a pretty shit club. VISA provides exposure to the high yield consumer credit market and had returns that were modestly higher than prosper over the same time frame. By which I mean ~100% appreciation over 3 years vs. 5.7% per annum. And the risk profile of the equity play might even be lower; we don't know, since the distribution of defaults is not published by prosper.

fragmede 5y ago

These days there are a number of platforms like Globevestor that show the kind of deals available to accredited investors. They don't get you access to the same deals that you get by working Sequoia, but that's still better than what non-accredited investors get access to. (WeFunder, specifically, tries to skirt the accredited investor regulation and offers tiny (they advertise "as little as $100") investments to non-accredited investors. It's not clear to me how they're doing that legally other than handwaving "crowdfunding platform" around.) Accredited investor status itself doesn't give you access to higher quality investments, but it keeps the poors out from being able to angel invest in their professional network. If I'm not an accredited investor and I have $10k that I've saved up and want to plow into my kid's friend's uncle's big thing that they're working on? It might turn out that the uncle's a total scam artist or the next Elon Musk, but it's my $10k. I'm allowed to go to vegas and put it all on black if I wanted to, so why aren't I allowed to invest same as an accredited investor?